Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality...

 

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Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,400 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $30 each; they cost $33 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor Overhead $ 15 $ 111,000 9 66,600 3 22,200 Allocated facility-level costs Total 6 44,400 $ 33 $ 244,200 After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $33 each when it can buy them for $30 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total relevant cost Per Unit Total Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,400 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $30 each; they cost $33 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor Overhead $ 15 $ 111,000 9 66,600 3 22,200 Allocated facility-level costs Total 6 44,400 $ 33 $ 244,200 After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $33 each when it can buy them for $30 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total relevant cost Per Unit Total